The Nicaragua Canal Plan’s Energy Connection

The world reacted with a collective “Huh?” earlier this month when Nicaragua’s National Assembly voted overwhelmingly to hand a 50-year concession to a Hong Kong company to build a canal across the country. Among the many mysteries were exactly where and how such a thing would be built – and why, too, given that the Panama Canal is undergoing a massive expansion due to be completed by 2015.

The scheme still sounds crazily sketchy, but now we’re getting a few answers. Turns out there’s a significant global energy component to the plan, which envisions a 178-mile link from the Caribbean, through Lake Nicaragua and onto the Pacific – three times longer than the Panama Canal.

Wang Jing, a 40-year-old Chinese who leads HKND Group, told a news conference on Tuesday that the canal would have a big advantage over the Panama Canal in that it “will be broader, deeper and allow larger vessels to pass.”

More precisely, according to Lin Boqiang, director of the China Center for Energy Economic Research at Xiamen University, “The canal will accommodate large liquefied natural gas carriers and oil tankers from the United States and Venezuela heading toward China.” In doing so, Lin told China Daily, “The new canal will become a lifeline in global energy trade.”

This makes some sense. China (and Chinese enterprises, but that’s a blurry line) is pouring tons of money into renewable energy, but that hasn’t been and won’t likely be enough to keep it from burning more fossil fuels, both for electricity generation and in the transportation sector. It would love to get its hands on some of that very cheap natural gas that the hydraulic fracturing revolution is producing in the United States.

You might figure it would be easier to export U.S. gas from the West Coast, but proposals to do so have stumbled, and the one that’s on the table now faces many hurdles. Meanwhile, the U.S. Department of Energy just approved a $10 billion plan to convert a terminal on the Texas Gulf Coast into an LNG terminal, and Louisiana might be getting one, too. Sending big ships through a Nicaragua Canal – instead of around Cape Horn – would make LNG exports from the Gulf Coast to Asia viable.

According to the China Daily report, Wang’s firm HKND Group “is working on the feasibility report with leading firms such as US-based McKinsey & Co, UK-based environmental consulting services provider ERM Group Inc and China Railway Construction Corp, China’s biggest construction company.”

It still sounds very much like a long-shot, at best, but Wang says we won’t have to wait long for the six-year, $40 billion project to begin: He says it will break ground late next year.